|
The Year so far
For our industry, the summer represents a time to both look back and look forward.The first seven months of this year have seen a sustained increase in technology spending. This has brought about renewed, but cautious optimism, that buyers are once more making investments in technology.
However, any thoughts of a return to the profligate spending of earlier times have to be ruled out, since today’s buyers are far more cost-conscious than their predecessors. Buyers are being far more conservative than they have been in the past by looking for hard-cash benefits from investments. Indeed many enterprises are looking to get returns within six months, and at most within a year.
Another characteristic of today’s market is that it is increasingly tough for new innovative companies looking to either create a market or establish a new market. This is because of the decline in early adopters.
We are also seeing that even some of the very largest companies are looking to increase their indirect channels simply because they cannot justify the cost of hiring their own direct salespeople. Indirect channels are thought by many to be the most-likely mechanism of achieving lower cost of sale.
This newsletter will look at the ways that companies can reposition themselves for increased activity post summer, and at the same time, prepare for what we see as a long-term change in the marketplace.
Restructuring
One of the easiest things that any company can do is to restructure its current channel strategy. The larger players are continually looking at consolidating their resell channels so that there is an increase in the value-added component. As both hardware and software become commoditised, then the need to add value as well as shorten sales cycles becomes paramount. We anticipate that big organisations as well as larger software companies will see a change in the sales model from perhaps 50:50 direct, to 70:30 indirect.
The traditional argument of direct versus indirect is one of control versus lack of control. That argument, we believe, has been eroded by the fact that the issue is not one of control, but of access to the customer and the way that the customer buys. Clearly, working through a third party who has that knowledge and relationship, we believe, is far more important than any perceived lack of control over the sales process.
From what we have seen and observed, it is companies with the ability to adapt to a customer’s buying process where the winners will be found.
Partnering
It is rare that we come across companies that actually have a clear and defined program to court new partners and to have a methodology in place for their success. In our experience, the simplest mistake that is often made is to fail to have a very clearly defined profile of what the ideal partner should be. Once that is defined, then a lot of resources can be geared towards making sure that the partner is going to succeed.
In this respect, we have seen companies realising that they have to pay more than just lip-service to partnerships. There needs to be proper and thorough training. There needs to be a very clear understanding given to the partners as to the positioning of the technology, and of course the most successful ones will take the time out to understand how the synergies work between technologies to achieve that.
A balance of resources between the technical and sales level, makes sure that the partner understands clearly the mutually beneficial objectives as they evolve in the sales process.
Many software vendors a few years ago delighted in publicising their relationships with any of the big five major integrators. The reality was that whilst this may have looked good, there was no real tangible return, and in many cases these consultancies simply swallowed up time and resources. What is needed is to examine the real value of the relationships and set real, actual quotas, and not just marketing benefits. The only relationships that will work in today's economy are the ones where there's real investment and real belief in making money.
Differentiation
One of the recurring themes we find with most of the smaller software companies is their enthusiasm for their own product, but their failure to understand their differentiation in the market. It used to be the case that a technology differentiator or a unique selling benefit would give you a competitive advantage in the market place.
As less innovation takes place, and more consolidation becomes the norm, it is vital to understand how the buyer perceives you, or fails to perceive you. If we take, for example CRM, Business Intelligence, Data Warehousing, Service Management and similar technologies, it becomes very apparent that there are many products that outwardly provide very similar capabilities at similar price levels. The challenge is in ensuring that you have a differentiator that is real, meaningful, and can be easily communicated by anybody involved in the selling process for your particular solution or product.
It is therefore very important to identify what technology differentiators you have and that there is an associative value with them, and more importantly, what the marketing differentiators are. In other words, find out the business requirements of the specific niche or vertical market that is being targeted. Clearly, the transformation that needs to take place here is to understand the business that you are in rather than the technology that sells into that vertical market. One effective way to enter that market would be through resellers who have the business knowledge as well as the ability to interpret your technology with business benefits.
We have seen far too many companies fail to understand these differentiators, and then complain bitterly that they are not getting the expected sales.
Marketing Campaigns
As the new conservatism in the markets is replaced by more liberal spending we believe that those companies that adopt a multiple marketing approach will be the ones that succeed. All too often we see companies adopt a single-threaded approach, such as telemarketing or telesales, with no coordinated seminars or promotions that address the buyer’s needs from different perspectives.
Naturally, the costs of coordinating a marketing campaign need to be considered in the light of the budgets of the software. However, putting together a targeted campaign that addresses the different ways a buyer is influenced, whether through the press and media, direct mail, emails or seminars is vitally important.
Conclusions
Today the buyers are not looking purely to buy new technology for its own sake; they are looking for the benefits of the technology and what it brings to their organisations. Companies that think all they have to do is to reinvent the wheel and add new features should not be surprised that other companies, with less expensive and less feature rich software, but more flexible and targeted sales and marketing strategies are doing better than they are. The business models are changing; today’s buyer demands more value at a lower cost. The companies that are able to meet these demands will be the winners.
SSP is continuing to help companies grapple with the challenges that confront software companies in today’s markets and further details on our search services, consulting and other services can be found at www.sspltd.com
|
